PULSE of TURKEY No 4...................WEDNESDAY MAY 13th 1998
BLUE CURRENT INSTEAD OF RED ARMY
Turkish-Iranian natural gas agreement comes to life. Route for Turkmen gas still precarious. Georgia becomes bridge for an east-west corridor in the Caucasus. Russian gas to be Turkey’s prime energy source.
The $20 billion Turkish-Iranian natural gas agreement signed in 1996 tops the list of American objections to Turkey’s arrangements for its energy needs in the new century. (See: Energy – Through Great Cooperation, not the ‘Great Game’). By pointing to the “take-or-pay” provision of the agreement, the Yılmaz Government argues that it has to pay for the gas even if it does not import it. Besides, the investment has already covered a long distance during the Erbakan government’s one year in office and PM Yılmaz is now giving it the finishing touches, after having slowed down the work, on coming to power in June 1997, to appease Washington.
The Iranian gas reached Doğubayazıt on the common frontier before the end of last year. The Doğubayazıt-Erzurum stretch has already been handed over to a consortium for $117million. It will now be shipped to Ankara and beyond with a 1220-km pipeline for which tenders are invited in four parts. The first part, the Erzurum-Imranlı stretch, covers 260 km and costs just over $150 million. The second part is another 260-km stretch between Imranlı and Kayseri, costing about $120 million. The building cost is even smaller for the rest of the project, after these mountainous stretches are left behind. The 320 km Kayseri-Ankara stretch will only cost $100 million and the 270 km plus 110 km Kayseri-Konya-Seydişehir stretch will cost another $100 million.
Thus BOTAŞ, the Turkish Pipeline Company, is nicely surprised to face a less than $500 million bill to foot for these four parts, while the original estimate was $700-800 million. The original estimate for the entire Turkish part of the pipeline was $1.2 billion. It has now been slashed to less than half - $580 million. Preparations are now under way for the commencement and speedy completion of the investment in the summer months.
Fight over Turkmen gas to the West
Even though Washington has strongly objected to this project, it has eventually come round accepting it as a fait accompli. It was thanks to Turkey’s argument that the whole project was a trade deal with Iran and not a Turkish investment there, as American laws call for an embargo on countries that make more than $30 million investment in Iran.
Having reluctantly conceded to the pipeline project, Washington is now trying to prevent it from being the mainstream of central Asian gas to the western world by also running the Turkmen natural gas. At the end of December 1997 Iran inaugurated a short pipeline from Turkmenistan to Iran to import natural gas. The ultimate aim was to extend the pipeline so that Turkmen gas could be exported to Europe by way of Iran and Turkey.
Exactly a year ago, in May 1997, The Presidents of Turkey, Iran and Turkmenistan, Demirel, Rafsanjani and Türkmenbaşı, concluded in Ashgabad an agreement for a natural gas pipeline to carry 30 billion cubic meters of gas a year from Turkmenistan to Turkey and beyond via Iran. But before all the legal technicalities were completed for it to go into force as a binding international document, Washington had second thoughts about its Central Asian energy policies and made a number of revisions to this policy so that it could thwart this project.
To make Turkey the pivot in these arrangements was the hub of these revisions and it involved a number of alterations in the USA's Caspian and Caucasus policies.
In return, Turkey began to consider the American plan for a costlier and roundabout route: Turkmen gas would be carried by pipeline under the Caspian, through Azerbaijan and thence to Turkey and beyond. Royal Dutch/Shell is carrying out the feasibility since Turkey, Iran and Turkmenistan commissioned it in December 1997. Washington hopes to win over Turkmenistan to this project with Ankara’s help, but it is not certain which way this struggle will eventually evolve.
The route is not vital for Turkey concerning Turkmen gas or any other energy supplies from the region, as long as Ceyhan is the outlet of the Central Asian oil and gas. And also neither of the two supers is too vexed over the outcome. Turkish diplomacy expects that Washington will sooner or later get over its anti-Iranian obsession and it will then see the Iranian-Turkish gas agreement as a wise arrangement that saves Turkey from being totally dependent on Russia for energy.
Blue Current out of the blue
Moscow’s interest in linking the former Soviet Union’s energy resources with those of the Middle East with a pipeline through Turkey was no secret. There were press reports that Ukraine was interested in a pipeline linked to Samsun. Later on there was talk of a pipeline from Russia to Israel via Turkey. Similar projects were common knowledge, but it was still a big surprise when it was suddenly announced at the beginning of this year that Turkey and Russia had just signed an agreement to build a big natural gas pipeline under the Black Sea.
On September 6th, 1997, Energy Minister Cumhur Ersümer revealed that Moscow was offering Turkey natural gas at a price 12% lower than world prices and that it was the lowest rate since 1984. The Russians had also agreed to undertake all the investment cost of the pipeline and gas would be paid on FOB basis, i.e. as it passed into Turkey through the pipeline.
The project is called Blue Current and is a part of Russia’s plans to meet most of Turkey’s energy needs through a partnership between Gazprom and Botaş by the year 2010. Ersümer said that by 2010 Russia would supply 56 percent of Turkey’s total natural gas consumption.
The Blue Current project calls for 16 billion cubic meters of Russian gas a year, covering a distance of over 1200 km between Stavropol and Ankara. The 373 km stretch between Stavropol and the Black Sea is about to be finished. The toughest part of 400 km under the Black Sea will be contracted to the Italian company Saipem and/or the Dutch company Allseas by May 15th and will be totally financed by the Russians. Botaş will build the 444-km stretch between Samsun and Ankara.
Washington promptly objected to this project, officially warning Ankara in early April that it was not feasible. No one had ever laid pipelines at a depth of 2100 meters under the sea and the Russians were playing for time for their own projects at the expense of the Baku-Ceyhan project, maintained the Americans.
Indeed, the lowest depth hitherto for any pipeline underwater has been 650 meters (between Tunisia and Italy) and the Blue Current project goes down to 2150 meters.
To counter American arguments, Gazprom invited Turkish journalists to Stavropol in April and showed the speedy work they had carried out in building half of the Russian stretch. They promised to complete it in May and inaugurate the pipeline in the second half of 2000 with an initial supply of 500 million cubic meters of gas that year. By 2005 it will reach 16 bn m3/year. Marco Giorcelli of Saipem explained the security measures they were taking for the Black Sea crossing. Special cameras would keep a constant watch on the points where the pipes are joined to detect any leakage, and pressurised water would be pumped from Russia to Turkey through the pipeline before it is delivered to Gazprom and Botaş, he explained.
As another step to help Turkey meet its urgent energy needs, Gazprom increased its natural gas supplies to Turkey via Bulgaria from 6 bn cubic meters in 1997 to 8 bn cubic meters this year.
Minister of State Güneş Taner, who coordinates economic cooperation with Russia, said that no one should be surprised if Turkish-Russian trade rose from its present level of $10 billion to $100 billion in the next few years. By all indications, Turkish-Russian relations may see the conversion of the Red Army threat to Turkey in the 20th century to the Blue Current cooperation in the new century.